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What is a Bitcoin and How Does Bitcoin work for Freshers

What is bitcoin and how does bitcoin work's

What is a Bitcoin and How does Bitcoin work

If I have to sum up BITCOIN in very fewer words it’s a “Digital currency or asset” or “Decentralized currency”.

By Digital currency or asset I mean, Asset is something which has a value. Like your house, your car, you’re gold. If you are going to sell these things in the market, you will get money in return for it as people know that these things possess value.

BITCOIN is of such kind, it’s an asset that you can sell in exchange for money.

This is a digital asset because unlike your gold, car, and house. It’s not available with you. You can’t touch or see it. It’s stored in the hard disk as its digital.

In this particular Guide we will discuss  How Does Bitcoin work.

It’s a currency as you can see use it as a payment system. If you want to pay anyone across the globe you can do so through BITCOIN.

Decentralized because it’s not under any authority’s grip. Just like your other currencies rupees, dollars have the central authority on it. The rupee has the authority of the reserve bank of India.

Reserve bank of India decides what is going to be the value of a rupee and how many notes can be print.

This is not the case with BITCOIN. The value of a BITCOIN is decide based on the number of people using it.

No person or an organization can control BITCOIN or can do so in the future. Hence No one suddenly declares the demonetization BITCOIN overnight.

Who invented BITCOIN?

BITCOIN is invented by a person named Satoshi Nakamoto.

Who is he? Where has he come from? What does he do? It is not known by anyone. He is an anonymous person.

A person doesn’t even know whether it’s just a person behind it or it’s a group of people who have invented BITCOIN.

Why was BITCOIN made?

The biggest reason why this was made is the financial crises of 2008. When due to some mistakes of banks, the banks crashed hence lakes and millions of people over the world suffered a loss.

The banks were led to insolvency due to their own wrong decisions and the loss had to their own wrong decisions and the loss had to be borne by every individual and every taxpayer. After that people realized till when they will be relying on banks.

The founders of BITCOIN have said that the motive behind starting BITCOIN is to create a decentralized system away from the banks and the government.

 Which won’t be under the control because if they're a failure in the part of the bank or the government the entire economy fails?

But if there’s a decentralized system like BITCOIN. Due to an individual or an organizational error, the entire financial system won’t crash.

Wherever there a centralized database or a center one point, it’s very convenient to hack and fail that system, and if we bring decentralized there no one point to hack that can lead to failure and it’s generally successful.

Read More About Bitcoin On LINKEDIN

Is BITCOIN legal in India

There have been rumors spread regarding the legal status of BITCOIN in the country especially after the budget 2018.

But the truth is my friends that during the budget 2018 our finance minister late Mr.Arun Jaitely has said that BITCOIN won’t be legal tender. That means you can’t be using it to pay at any shop or any restaurant.

The obvious just like the gold coins and the properties being any legal tender in our country but all these things are legal and BITCOIN is just one of them.

Trading BITCOIN is 100% legal in our country; it’s legal to even exchange it. It's just that it can’t be used as the payment system.

How to buy BITCOINS?

If you want to buy BITCOIN friends or wish to trade them or invest them, then the easiest way to do is to use a cryptocurrency exchange system.

Exchange services are such websites, apps, or platforms where you can convert rupees into BITCOIN or BITCOIN into rupees.

India’s largest exchange service is ZEBPAY and the world's largest COINBASE.
 These two are the biggest and hence the most trustable and secure.

If you want to buy BITCOIN so I would recommend you to use ZEBPAY if you are residing in India or COINBASE is that not only BITCOIN but you can exchange your money in the other cryptocurrency as well.

What taxes are there on BITCOIN?

If you trading on BITCOIN then taxes are levied just like on the other assets in our country.

Short term capital gains and long term capital gains some taxes just like your other assets. But one point I would like to bring here is that the government of India has not yet cleared the stand for BITCOIN.

They are going to introduce all the rules and regulations towards the end of the year. Based on the legal framework they would want to make for it.

whereas most of the countries are accepting BITCOIN worldwide.

In the USA they are regulated just like other stock.

In JAPAN BITCOIN is legal tender and be used to pay anywhere.

In GERMANY you can even buy a house with it.

In SWITZERLAND you can even pay the taxes.

But some
countries haven’t accepted BITCOIN. Like in China, these exchanges are banned but the mining still happening in China.

In RUSSIA there a Flip-Flop policy, they have said yes sometimes and sometimes said NO.

Advantages of BITCOIN

The biggest advantage of BITCOIN over the physical currency is that it is not under the control of any central bank.

So, if you are sending BITCOIN to BITCOIN money to anyone then there’s NO middle man here,
 hence the transaction phase is very less and naturally if theirs is no central bank so fluctuating the value of BITCOIN is not in the hands of any government or Bank.

The Biggest advantage of BITCOIN is on international payments. There are charges, currency conversion, remittance fees which you have to pay the bank to transfer your money. These charges you don’t need to pay here.

The other big advantage behind using BITCOIN is the BLOCK chain technology which is a financial sheet where every BITCOIN transaction is recorded and secured cryptographically.

Whether it is going to get successful in the future or not, Blockchain is going to be successful and it's still is many government and banks have already started using blockchain.

I won’t go to be the depth of this; you can research and read about it yourself.

Disadvantages of BITCOIN

The reason for the disadvantages of BITCOIN is “decentralization”. As there is no central authority to controls it.

Its price keeps fluctuating its price fluctuates based on the number of people investing and taking out from it.

The fluctuation is so high that if you bought BITCOIN worth 50,000 today, it can be 1 LAKHS tomorrow or can be even worth just 25,000.

The biggest downside which still prevails is that the transaction cost and time are still high and payments are also not very easy but these things are slowly getting better, the transaction time is improving as and when there’s an update in BITCOIN.

Few people are arguing that BITCOIN is giving way to illegal activities and criminals are using BITCOIN for their transaction. So their identity is hidden.

But it worst because all the transaction of BITCOIN is recorded on the blockchain. However, it is anonymously recorded. Which is not possible with the other currencies like rupee, dollar, and gold’s transaction?

Earlier corrupted people used to transact using rupees and dollars and now using BITCOIN so there is not any significant effect.

So as argued by many in India that this has increased the criminal activities is not true otherwise other developed countries of the world would have no made it legal.

Should you invest in BITCOIN

So my first suggestion would be to invest only the amount which you won’t mind even if it turns ZERO. Because BITCOIN value can increase or decrease anytime.

one more recommendation learns more about How Does Bitcoin Works. That will make a clear picture of your mind about Bitcoin Investing.

There should be a belief to invest in BITCOIN that it can make an alternative financial system and alternative worldwide currency.

So we are encouraging a system alongside rupees dollars and other such currencies which can help us to transact worldwide without any middle man. This should be the most important reason to invest in BITCOIN.

Some people also invest in here as in the other assets like gold and properties hoping to get their money double however there’s no guarantee for the don’t believe in this reason much.

Some people also think that BITCOIN will be the future of the currencies and it can either replace the existing currency or exist alongside them.

I would suggest that if you not investing then you can at least research BITCOIN and blockchain. Because it’s going to very important in the future.

So friends that were all about BITCOIN. I hope you have to understand the basics of BITCOIN and How it works. If you have any doubts related to BITCOIN you can comment below your query.

Warning:Taxinvestcare advised you to do all kinds of activity related to investments in the presence of experts.

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